Family businesses are commercial organizations in which decision-making is carried out by family members, and it is their goal that the next generations of the family take over the company in the future.

Family businesses are in Spain the most widespread type of company within our economic system, making up about 85% of the Spanish business fabric.

According to a study prepared by the Family Business Institute, the average size of these family businesses is about 30 employees, being companies with a long tradition and antiquity, mostly founded in the 1990s.

What is the family business really?

What is the family business really?

When we talk about a family business, although there is no univocal concept, we refer to “one in which a group of unique people through family ties and belonging to one or more generations share part or all of the ownership of the media instrumental and the direction and decision making of a company ”.

Despite the different concepts that we can find around this term, they all have to share at least two objective and related elements. The first of these is the existence of a family bond between the members of the business management; and the second and objective, the existence of a company.

Finance family businesses How to do it?

Finance family businesses How to do it?

According to the latest report by the European Family Business Barometer, in its fourth edition of October 2015, the family business in our country is at its best since 2010. That the family business is at its best is a fact very important for all family businesses, and that is that the expectations of economic evolution and the main business indicators are much more optimistic when they talk about Spanish family businesses than when they refer to those of other European countries. A less encouraging scenario is therefore expected for family businesses.

If we look at the way in which the family business is financed, we see that during the time of crisis, despite the fact that the financing costs of the family business and the non-family business are similar, the former does not contemplate -in a 83 % of cases – other types of financial alternatives.

This indicates that there is a high ignorance of the benefits and benefits of financing alternatives such as crowdlending by family businesses.

So, we assume, many of these companies do not yet know the benefits and benefits of requesting this type of private financing, which in turn is a very convenient alternative financing for family businesses.

Is the financing of family businesses threatened?

Is the financing of family businesses threatened?

During the economic crisis, many non-family businesses were forced to reduce their debt-to-capital ratio due to difficulties in refinancing the debt. This happened especially with SMEs, which acted under the “financial provider syndrome”, that is, SMEs were looking for the bank that gave them the best conditions for each loan, without focusing on one of them, something that did not happen with companies relatives, who sought greater stability.

However, this did not happen in the cases of family businesses, since they are not companies whose objective is to give dividends to their shareholders, reinvest their profits in the company itself. In this way, they maintain their debt ratio at all times. A debt that is usually usually long term and as we have already said, with financial and banking entities.

However, currently non-family businesses also seek long-term financing, and although many are non-family businesses (less skeptical of new investment and online financing platforms), many others seek financing in a much more traditional way. .

What do we mean by this?

What do we mean by this?

Well, it means that the financing of family businesses through banking entities poses a threat to their growth and stability. This is because there are too many companies (family and non-family) that depend on this type of financing, so if there is not enough liquidity to finance family businesses they may be harmed when developing their activity.

Therefore, the problem lies in the existing dependence on the financing of companies in general and the financing of family businesses in particular, with bank financing, which implies a lack of liquidity to finance all of them.

This problem would not be such if we did not take into account the data provided by the latest study of the European Barometer of Family Businesses that we have previously shown: 83% of companies consider only bank financing, twice as much as in the previous study. Only 16% of these companies contemplate financial alternatives such as private equity, Crowdlending, etc.

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